As the housing industry continues to struggle in the face of a declining economy, much has been made of how lending institutions have hurt themselves through questionable mortgages to people who were not in a position to be able to pay the loans back. If these institutions had practiced good credit administration, perhaps they wouldn’t be in the position they find themselves today.
“Sound credit quality assures customers that their deposits are safe and sound,” says Rhonda Harper, an assistant vice president of banking at Wells Fargo in Houston. “That’s very important in our industry in this day and time.”
Smart Business talked to Harper about how good administration can take some of the risks out of banking.
What constitutes good credit administration?
There are several components. No. 1 is sound credit quality. The soundness of a financial institution offers its customers some assurance that their deposits are safe and their funds are available for lending in the communities in which they operate. We’ve all seen the current industry deal with institutions such as Bears Stearns and how its situation has shaken the industry to its foundation.
Another component is managing your customers’ expectations and being your customers’ advocate by communicating with them in a timely manner and getting forthright responses to them so that they understand the expectations from the start. As a bank, we follow up; we don’t just close a loan and forget about them. Periodically, we contact customers to see how things are going and let them know that we’re there for them and that they can let us know if they need anything.
Finally, it’s knowing your customer is key, asking questions, listening to customers and helping them uncover their needs. Making periodic visits can provide a lot of insight and a lot of information you couldn’t get over the phone.
What kind of safeguards can help make sure these components happen?
First is a good sound credit policy. Limit your losses and institute credit policies that are going to give you a way to recognize early warning signs. If you get periodic financial statements from your customers you should review them in a timely manner and address anything that may be of concern.
Once you set your guidelines, stick with them. Sometimes, we approve transactions on an exception basis, and when you do that, you need to be sure that the risk is mitigated with sound judgment. A consistent application of your underwriting criteria is one way to be sure the risk is within a safe range.
What are some common mistakes that are made?
Not following your credit policy guidelines is huge, along with not reviewing the financials in a timely manner once you receive them from your customers and ignoring early warning signs that pop up. If customers have repeated overdrafts and are fully advanced on their line of credit, that might be a sign that you need to get out and pay them a visit. Get a current copy of their financial statement and ask questions to see what’s going on.
A lot of times, if we recognize the signs and get out there early enough, we can prevent them from maybe digging a deeper hole. Banking is a working relationship, and maybe we have a product or service that the customer can benefit from before it’s too late. To me, it’s good old-fashioned common sense and following your guidelines.
What can be done if an error is committed?
First, you need to fix the problem and educate your staff and your bankers. We have an approval delegation with a chain of approvers to help the bankers make sure we’re aware of everything we need to know about the credit. It’s very important to have another set of eyes, a bit further removed, that can look at the credit and pick up something the others may have missed.
Again, one of the most important things to do is to step back and periodically look at your portfolio to see what you’ve missed and then to take appropriate action to correct the mistake and make it right.
Does the size of the company reflect the amount of risk for a loan?
You can have a different set of standards for different-sized loans. If you’re talking about a deal that’s more than $2 million, you may require periodic financial reports, quarterly information and a different set of rules because your risk is increased.
RHONDA HARPER is an assistant vice president of banking at Wells Fargo in Houston. Reach her at (713) 209-6647 or Rhonda.Harper@wellsfargo.com.
Assistant vice president of banking
If you’re going to get the right things out of employees, you have to put the right ingredients in first.
It’s an idea that has become one of the main pillars of Maura Walsh’s leadership philosophy as the president of HCA Gulf Coast Division, a 12,000-employee branch of Hospital Corp. of America.
Customer service, maximum efficiency, workplace safety or whatever it is you want your employees to value and embrace, you must first set the example at the top. Walsh says you do that through communication both speaking and listening and actively engaging your work force in person.
“It’s not just important but essential that leadership be visible within the organization,” Walsh says. “Leaders need to get to know their employees, and the best way to do that is to walk around, talk to them and give the employees the sense that you’re approachable. You cannot know what is going on in your organization sitting behind a desk. You need to be out talking to employees, asking their opinions, getting their feedback.”
Walking among your employees, asking them questions about their jobs, even casually bantering with them about their weekend plans, helps give employees a sense of confidence in your leadership ability, that you want to be “in the know” and actively engaged in what is happening on the front lines.
Walsh says it also helps tear down the walls that can exist between management and employees. If you can overcome the intimidation that can occur when an employee reaches out to management, you can make strides toward unifying your company around common goals.
As the president of a hospital group, and former president of a hospital, Walsh has learned a thing or two about rallying diverse groups everyone from doctors to nurses to office staffers around a single vision and a set of core values. Walsh says it can be difficult to get different groups to read from the same script, but it’s essential to a company’s long-term survival.
To bring a company together, you must communicate. However, the most important aspect of communication does-n’t start with you. It starts with your employees.
Walsh says you need to find out what motivates your employees, what drives them to come to work each day and to try their best.
She says you shouldn’t assume it’s a one-size-fits-all proposition. Personality, background, job type, all of it affects what truly motivates each employee.
But Walsh goes even a step beyond that. She wants to know what “excites” her employees about their work.
“As you work with your people, you get to see what makes them excited every day,” she says. “For instance, most CEOs are motivated by challenges. On the CEO ranks, there are a lot of commonalities, but you really need to get to know your individual employees, understand what gets them motivated to do their work.”
Just as a manufacturing company is composed of administrators, department heads, manual laborers and other employees whose job descriptions differ from department to department, a hospital has doctors, nurses, cooks, janitors, secretaries among its ranks. Getting to know different jobs, and the people who fill those jobs, is a common denominator among executives who seek to strengthen the relationships within their companies.
Walsh says you need to be able to get on the same level with each department by putting yourself, at least mentally, in the place of the people who work there.
“You need to hit all levels within the organization,” she says. “It’s important to understand what the more entry-level workers think, but it’s just as important to understand what those more up the ladder think. In our case, what our nurses are thinking, what our technicians are thinking, and it’s especially essential to understand what our physicians are thinking and feeling.
“Each employee has different priorities. Here, what is important to someone in the operating room is probably different than for someone who is working in the intensive care unit versus someone who is working in the lab. Obviously, there is always going to be some commonalities throughout departments, but each department, each unit of a business, will have many of their own unique concerns and ideas.”
Drilling down to that level with your employees requires you to go beyond simply noting that you have an open-door policy. You need to get beyond the open-door policy, make personal connections and give employees a reason to connect with you.
“Most employees would not feel comfortable walking into the CEO’s office to let them know what might be happening on their unit that particular day,” Walsh says. “The more visible the leadership team is, the more approachable they are to employees, the more likely employees are going to share with them important information.
“Having an open-door policy is great, but it doesn’t take the place of walking the halls and making sure the folks out there on the front lines know that you truly do care about them and do understand that you want to know what you can do to make the workplace better.”
Enable people to achieve
Walsh says employees need to know that management has placed them in the best position to succeed within the company.
Everyone in the organization from senior management down has to have his or her talent leveraged for maximum effect.
She says the challenge begins at the job interview and never really stops. As a leader, you have to remain constantly on alert for ways that you can enable your employees to achieve more success.
“That’s a challenge for anyone,” Walsh says. “You can only get so much information out of an interview. If you have folks who know the individual you’re interviewing, that’s what I find very helpful. I find just using references, talking to individuals who have worked with the person, is helpful. You might think you’re only going to get a one-sided opinion, but oftentimes, when you’ve talked with people who have worked with an individual, they’ll give you honest feedback about what kind of person they are to work with.”
Once a candidate has been hired at HCA Gulf Coast, Walsh and her leadership team take proactive steps to keep their best and brightest performers, and that includes a chief operating officer development program designed to help the company fill management positions from within.
Familiarity is another key ingredient in building unity within an organization. With that in mind, Walsh attempts to fill management positions with in-house candidates before looking outside the organization.
It isn’t the ideal course of action in every situation, but internal promotion is preferable to Walsh for several reasons: It saves management the task of having to train a new employee from the start, it helps bridge the gap between management and employees when the manager is already familiar with a company’s people and practices, and it gives high performers long-term goals.
“Any organization that does long-term planning should always want to look at individuals within the company, individuals within each division and what their work patterns are going to be moving forward,” Walsh says. “If I feel I’m going to have opportunities for people three to five years down the road, I want to be sure I have the right caliber of individuals to put in those positions. You always want a talent pool your organization can draw from.”
Walsh says she looks for several key traits in people who aspire to management-level positions at HCA Gulf Coast, traits that identify an individual as a unifier and consensus-builder.
Management-level candidates at HCA Gulf Coast, perhaps most importantly, must be willing to look in the mirror and self-assess their own areas of weakness, something with which Walsh has had firsthand experience during her administrative career.
“I was, as many people are, not comfortable with speaking in public,” she says. “It’s something that does not come easily to a lot of individuals, yet in a leadership role, that’s an important skill.”
Walsh overcame her public-speaking obstacle by continually placing herself in situations where she was forced to address an audience. She wants to see the same willingness to tackle personal challenges out of her managers at HCA Gulf Coast.
“Communication skills are part of your makeup,” she says. “Some of us are naturally effective communicators, others are not. But even though we all have our strengths and weaknesses, the more we work in our profession, the more opportunities we have to fine-tune our skills and perfect them.”
When you have finally achieved your goal of a company united around a common vision and a set of core values, your job hasn’t ended. When you arrive at your goal, your job as a CEO shifts to maintenance.
Walsh says you must keep your employees focused on the company’s goals, which is a constant task. If you aren’t vigilant about correcting those who veer off course and celebrating those who set good examples, your new culture will quickly start to erode.
She says it boils down to one word: recognition. You must recognize what your employees are doing and acknowledge their contributions to making your vision a reality.
One of the best ways to recognize an employee is to do it in person. Walsh says it doesn’t have to be a spectacle. You don’t have to gather your managers around a person’s desk and sing a song like the waiters who bring out the slice of birthday cake at your favorite family-style restaurant. Sometimes, it can be as simple as a written note. But you can’t wait weeks until a block of time opens in your schedule.
Walsh says recognition is a dish best served fresh. “When I was working in a hospital with less direct responsibility, I was a firm believer in personal notes,” she says. “I would send a number of personal notes to employees every week. I can remember going to an employee’s office about a year later after I had left the hospital and saw one of the notes I had sent still on their bookshelf.
“I don’t know if I do (recognize people) often enough. I know our lives are very, very busy, and we don’t, as leaders, always take the time to step back and recognize the individuals who are making a difference. But when someone sees a note you’ve written, it sends a message that you know recognition is important. Everyone likes to be recognized for what they do, and I think, oftentimes, we underestimate the value of just one-onone telling someone you appreciate what they’ve done.” <<
HOW TO REACH: HCA Gulf Coast Division, www.hcahouston.com
Most people know that companies can be fined for acts of their employees. Did you know executives and directors could be imprisoned for acts of employees of their company? With the increased criminalization of laws, the risk of going to jail and being fined has dramatically increased over the last 10 years. However, there is a way for them to avoid prison, fines and community service for employees’ business malfeasance. They can implement an effective ethics and compliance (E&C) program and make sure that all their employees are aware of its existence, the laws that govern their business and the significance of complying with applicable laws.
Smart Business talked to Mark Jones of Porter & Hedges LLP to learn how businesses that are exposed to possible criminal liabilities by their employees and that is almost every business and organization can develop such programs and why they should do so.
How does an E&C program protect executives and directors?
Executives and directors should want to insulate themselves from being indicted for employees’ criminal acts. An E&C program set up in conformance with federal sentencing guidelines helps them do that. The guidelines provide certain things employers can do to avoid being prosecuted for employees’ criminal acts, which is critical in today’s business environment. Governments are criminalizing more laws nowadays, and executives and directors go to prison more often for business-related crimes than they did in the past.
Do judges use E&C programs to determine whether a business is a ‘good citizen’ when considering indictment?
Yes. There are seven principal points in the federal sentencing guidelines that employers have to address. A judge will evaluate an employer’s attention to the guidelines to determine whether it is a ‘good citizen.’ The degree to which the employer adheres to the guidelines and the complexity of its E&C program can influence a judge’s willingness to indict it, its officers and directors when an employee commits a crime.
Who is ultimately responsible for implementing an employer’s E&C program?
The responsibility lies at the top of the organization. The board of directors and senior management should have an effective E&C program in place to assure that the company is acting in the appropriate manner. It is also their responsibility to provide training for employees to ensure that they are familiar with laws in various areas, set up a ‘hot line’ to let them know if there are problems and appoint an individual who has credibility within the organization and in whom employees have confidence to monitor and report ethical issues and concerns and deal with them in an appropriate manner.
Who should be involved in setting up an E&C program?
The implementation starts at the top with the CEO and other senior management and directors who demonstrate their commitment to the program and who will monitor its progress. The makeup of the rest of the development team depends on the employer’s size and type of business.
Some of the typical people who might be involved in the implementation of an E&C program are the general counsel, human resources leadership, business unit leadership and outside counsel who is experienced in setting up and facilitating the implementation of comprehensive programs for employers as well as establishing protocols for monitoring the effectiveness of the program by executives and directors. The involvement of senior management and experienced outside counsel can make the programs more effective from the onset and speed up the learning curve for employers and employees.
Should smaller companies create E&C programs?
Regardless of size and type, every employer should have an E&C program in place. The extent and scope of the program depend on the size of the company and the industry in which it operates and the regulatory nature of its business. Economic crimes can occur in businesses ranging from sole proprietorships to multinational conglomerates, and judges look at them seriously in today’s corporate environment no matter who commits them. So, smaller companies should take the same steps as larger ones to protect their key personnel, although their programs can be scaled-down versions that are tailored to their specific needs.
There is no such thing as a generic E&C program, since each employer operates in a different environment. But, all businesses have to adhere to the same guidelines if they want to avoid potential prosecution, especially if they are engaged in business internationally, working in sensitive business areas, such as waste, water or environmental industries, or industries with significant political elements.
MARK JONES is a partner with Porter & Hedges LLP and has been involved in the establishment of numerous E&C programs for varying sizes of companies and industries. Reach him at (713) 226-6639 or firstname.lastname@example.org.
in the grocery distribution business of his father, Drayton McLane
Sr., and still years away from the worldwide business mogul and
Major League Baseball franchise owner he would become.
What was then known as the McLane Co. Inc. was still a small
family operation based in Cameron, Texas.
But McLane saw the potential of his father’s company, if his
father and the company were only willing to take a risk.
“We were in an old distribution center that had been built by my
father, who had been in the business since 1922,” McLane says.
“We needed to build a new, modern distribution center, and to do
it, I felt we needed to move to another city about 40 miles away.”
The company had no debt, and McLane needed to convince his
father to assume a large amount of debt in addition to uprooting
his business from Cameron to move to the larger city of Temple,
McLane told his father that the company could never reach its
full potential where it was and that any short-term adversity would
be worth it to position the grocery distribution business for
increased growth down the road.
“We were the largest employer in town, with about 100 employees, and it was going to be hard on them when we moved as well
as for my father and mother, who had lived there all their lives,” he
says. “That’s on top of going into debt pretty heavy to build this
facility. But that’s what we did, and in 1966, we opened our new
distribution facility in Temple, and that’s what really opened the
doors for our business to grow.”
McLane, who now chairs the McLane Group — a private holding
company that does not disclose revenue — says a tolerance for
risk is one of the toughest traits to build in a businessperson, especially when you’ve achieved success and feel like you’re on the
right track. But, he says, the greatest business leaders always see
the potential in their companies and have an eye toward what
might be in the future. You’ll never achieve your full potential in
business without taking risks and cultivating a work force that is
willing to follow your example.
It’s what has helped take McLane from small-town grocery distribution executive to the highly public helm of the Houston
Astros, where as chairman and CEO, he has overseen the most
successful era in franchise history.
What follows are some of the lessons he has learned about leadership in his decades-long business career.
Spread the passion
Leaders are teachers. Without an ability to teach, McLane says you
will never get your people to see eye to eye with you, understand
your vision for the company and feel the passion you feel for the
For McLane, teaching starts with getting his employees involved in
shaping the company’s future by posing problems and letting them
come up with their own solutions.
“You have to teach people your business, what the problem is or
what you want to accomplish,” he says. “You sit down in strategy
sessions, you outline it, and you tell them, ‘Here is what I think are
the objectives.’ Then let people spontaneously talk about it, maybe
go home knowing we’re going to meet at 8 o’clock the next morning
and figure out just how we’re going to do this. When I do that, I’m
always amazed at the big ideas people come up with.
“You have to give them free rein, this is what enterprise and entrepreneurship is all about, people with new, fresh ideas. Let
them feel a part of that, but also let them feel a pride in not just creating it but achieving it.”
But McLane says involvement in shaping the company’s future
should also come with a sense of responsibility and accountability.
Growth on a personal and companywide level doesn’t generally
occur when you arbitrarily throw stuff against a wall to see what
sticks, so employees given the opportunity to create must be given
parameters and then held accountable for staying within those
The parameters should fall in line with what you want to accomplish as a business.
“In a large business where you have a number of people working
for you, you have to identify what your objective is and what you
want to accomplish,” he says. “Is it products; is it services? You
have to identify the objective, what it is you want to do and what
it is you want to produce. Then you have to sell people on the goal,
what it is you want to achieve. Then the last part is the toughest
word in the English language, and that’s ‘accountability.’
“Imagine you’re back in college, and, on the first day of class, the
professor says, ‘I’ve got great news. At the end of this semester,
everybody is going to make an A. But I still want you to buy the
book, read the lessons, do the homework and be in class every
“Now, if I knew I was going to get an A regardless of what I did,
I might not try very hard. But that’s not how they do it in the U.S.
educational system. You have exams, term papers and homework
to determine your grade, so you’d better do the work if you want
to graduate. You have to be accountable in school, and, in business, it’s the same deal.”
Make time to connect
If leading starts with teaching, McLane says teaching starts with
A good leader must be a good communicator — a job that is
made exponentially harder if your business is spread throughout
multiple countries as is McLane’s business. But there is no excuse
for inadequate communication.
“That is just the job of a leader, being in front of people,” he says.
“Our company has a lot of people, about 9,000 employees spread all
throughout the country, so I have spent a lot of time going to different
divisions, talking to employees and getting to know just about everyone by their first names.”
As your business grows, it increases the importance of having
competent leadership beneath you. You can’t be in all places and
communicate with everyone on an as-needed basis the way you
might have been able to when your company was smaller, which
means you need to be able to know what to delegate to others,
who to delegate to and when to do the delegating.
Knowing how to delegate the operational tasks you used to perform will free up your time to get out among your employees on a
“Delegation is when you can clearly, clearly show someone or
groups of people what needs to be done,” McLane says. “You can’t
do all of the details as your business grows. You have to have the
skills and ability to pass on the responsibility to the people who
handle the day-to-day work, then hold those people accountable.
“Then, you free yourself to be upfront. You have to be that
upfront leader, be able to communicate with employees, walk around and see what kind of job they’re doing, and if they’re doing
a good job, to praise them.”
As your business grows internationally, the ability to free up your
time through delegation will become essential when it comes to
communicating on a personal level with your employees. Between
traveling for business matters and traveling for baseball matters,
it’s something McLane says he has learned firsthand.
“I recently returned from eight days in Poland, where we have a
grocery distribution system,” he says. “I visited almost all of our
employees there just as I do in the U.S., and we have almost 450
employees in Poland. Just like in this country, you have to take the
time to communicate, express your thoughts and ideas, and learn to
Use your perch wisely
McLane bought the Astros in 1993. At the time, the team hadn’t
made the playoffs in seven years and was facing sluggish attendance figures in the obsolete Astrodome.
McLane took the reins of the Astros with an eye toward
improving its fortunes on the field and at the gate. To that end,
his ownership regime has had some success, winning division
titles in 1997, 1998, 1999 and 2001 and a National League pennant in 2005, marking the franchise’s first World Series appearance. He also worked with city and county officials to fund and
build Minute Maid Park, the club’s home since 2000. Since moving to their new digs, the Astros have topped 3 million in season
attendance four times, placing them among the top draws in
Major League Baseball.
But the prospect of on-the-field success isn’t the only thing that
attracted McLane to the Astros. McLane also wanted to affect the
community at large, and the highly visible perch of Astros ownership provided him the perfect opportunity to increase his involvement in community programs.
“We bought the Astros to make them a champion but also to get
equally as involved in community programs,” he says. “We have
one of the most extensive community involvement programs in
professional sports. They go to over 3,000 events in the Houston
area every year. That kind of involvement ignited everybody.”
The importance of community involvement as a business leader
is something that McLane learned from his father, who partnered
his business with the United Way, the Boy Scouts and Girl Scouts,
and with American Red Cross blood drives.
“It’s really one of the great features of America and American
business, getting involved in philanthropy and giving back, both
financially and with services,” McLane says. “I saw my father do it,
and as we were in business, I found it makes you feel great about
yourself and your fellow employees in the company when you get
McLane says community involvement should be an extension
of your commitment to running your business the right way
and not taking shortcuts. You must decide what you want your
business to embrace as its core values, and then drive those
values to every person.
“I learned early in my business career that the most important things in business are honesty and integrity,” he says. “So
set your values, hold everybody — and yourself in particular —
accountable for integrity and honesty. That’s where most businesses go wrong. They try to cut corners and not do the right
“But if you dedicate yourself to your job, if you are really
excited about your job, your company, the people you work
with and your customers, it will show. You can overcome
almost any problem when you have a feel for what you do, a
passion for what you do, and you want to be the best.”
Aone-size-fits-all approach doesn’t fit today’s age-diverse work force: The generation gap between the youngest and oldest workers in some workplaces can span more than 40 years. On one end of the spectrum, there’s the 20-something who is fresh out of graduate school or college and is seeking flexible schedules or work-from-home options; on the other end are the employees nearing retirement.
“A company might have four generations of workers at one time,” says Kathi Crawford, Vice President of Human Resources for Talent Tree, a staffing company based in Houston. “Each generation comes with its own set of values, needs and attitudes, and vastly different expectations on communication styles and work expectations.”
Smart Business spoke with Crawford about how managers can best understand and meet the needs and priorities of each generation from the younger Generation X and Y to the middle-aged baby boomers to the older Silent Generation.
What is the most pronounced work style difference among the four generations?
The most glaring difference among the generations is the preferred method of communicating with others. Those in their early 20s, known as Generation Y, have had technology in their lives since they were very young. High-tech tools, such as video-conferencing, are second nature to them. Generation X those in their mid-20s to late 30s is also very comfortable using e-tools, such as e-mail and text messaging. Baby boomers who did not grow up in a high-tech world still prefer face-to-face meetings and telephone conversations over electronic methods of communicating, as does the Silent Generation those over 62.
What are the other differences among the generations that can be challenging to managers?
Each generation has a different approach to how it views the workplace. The Silent Generation tended to conform and not question authority; 95 percent of this generation, by the way, has already retired, although some remain in high-level positions. The baby boomers the group that is now running most companies tend to very optimistic and idealistic. They are typically overachievers and work long hours.
Generation X and Y are very different from the preceding generations in that they are much more concerned about their work-life balance. Perhaps they learned from their parents how difficult it can be to have a high-powered career and raise a family. The younger generations do work hard, but they are extremely careful to maintain a good quality of life outside of work.
How can managers help bridge the generation gap?
Managers need to be cognizant of the age gap of the audience when making a presentation, running a meeting or creating incentives for an employee. For example, a baby boomer might be motivated by a bonus, but a member of Gen X may prefer more vacation time.
It is also important that the generations take time to learn each other’s communication styles. Gen X and Y workers need to learn how to conduct face-to-face meetings and when to pick up the telephone rather than send an e-mail. This training can easily be accomplished through coaching, a method to which Gen X and Y employees are very receptive. That said, it is also important that the older generation work to incorporate more high-tech communication tools in the workplace, such as video-conferencing for clients or employees in remote locations.
Those employees in Generation X, in particular, come into the workplace with a lot of confidence and perceived ideas about how things work. Baby boomers or the Silent Generation must resist the urge to micromanage these young workers and instead help them along through mentoring and by gradually increasing their responsibilities. Remember, Gen X and Y are very sensitive about the work-life balance and are motivated by companies that respect that.
As the baby boomers retire, how important is it to change corporate culture to accommodate the needs of Gen X and Y?
It is very important because there are less people in this newer generation who can step into the shoes of the baby boomers as they leave. The competition for talent in Gen X and Y workers is already fierce, with talent shortages creating voids in certain industries such as IT, finance and engineering. It is the responsibility of the baby boomer and Silent Generation to transition their knowledge to the Gen X and Y workers and groom them for succession and leadership.
Companies can begin to do that by looking at the best practices used in other businesses in their industry. Business owners and managers should also seek support from their human resources departments and training and development professionals to help them facilitate and coach their staff about generational differences.
KATHI CRAWFORD is the Vice President of Human Resources for Talent Tree, based in Houston. Reach her at (713) 361-7315 or email@example.com. She is also serving as 2008 president, Houston Chapter, American Society for Training and Development (ASTD).
If a company is to maintain growth during an extended period of time, Ken Meador says that it must have strong leadership that stretches beyond the leadership team.
It is for that reason that TWR Lighting Inc. gets employees at all levels involved in interviewing new job prospects, says its president.
“It educates people about how to interview,” Meador says. “Eventually, they are going to grow up and take over positions, and they need to go through this process for professional reasons. It also gives them a sense of ownership. They know that they are empowered and that their opinion means something.”
Meador says that if you’re going to give your people the authority to make decisions, you have to respect the choices they make, even if you don’t always agree.
By letting his company which provides specialized hazard lighting and aviation obstruction lighting products and services grow as a team, Meador has helped lead TWR from 2004 revenue of $9.4 million to 2006 revenue of $13.9 million with 52 employees.
Smart Business spoke with Meador about how to bang your drum to create a healthy corporate culture.
Q. How can a CEO develop and maintain a healthy culture?
It’s a relentless drumbeat. Through my own actions, I try to demonstrate daily the initiatives we set up as a company.
Culture for me is how do people live and react and work with one another in an environment that has a common sense of purpose?
How you create that culture comes down to beating a steady drum, creating openness and having candor. I’m not afraid to discuss problems with my employees any more than I’m glad to give them the good news.
It keeps everybody on a level playing field here. The guy that is in my foundry is as much aware of what the business is doing and how he is a part of that as my VP of marketing and sales and my CFO.
Everybody gets a fair shake, and everybody has a better understanding of their part in the company’s growth and the potential that exists for them.
Q. How do you keep everybody tuned in?
I am a huge proponent of face-to-face communication. I manage a lot by walking around. There are those that call me Mr. Ken out back, but they call me by my first name. That familiarity helps level the playing field.
We have a front of the house and a back of the house. The only thing that delineates those two is a wall. I talk to as many employees on a daily basis as I can. Some of it could be as simple as what they thought about the last ballgame or how the family is doing.
Anything that will help build camaraderie and an openness so that they know my door is always open for them and, even as president, they can come talk directly to me if they so desire.
Q. How do you put your words into action?
I’m a firm believer in explaining to people what my expectation is. How they do that and how they utilize their resources with other people to achieve that expectation, that’s part of learning and becoming more self-reliant. That’s part of empowering them.
When I don’t tell them how to do that, I’m allowing them to work at their own pace and to really think outside the box on their own. That’s what creates really influential employees who learn from their mistakes and move on.
If I continually tell them how I want that done, the myopia in this company would drive itself into such a small little hole that it would all come back into my office. That’s not my deal.
I don’t tell people here how to do their business. I don’t tell the VP of marketing how to do his business any more than I tell the guy in foundry operations how to do his.
I’ve got 40 years of foundry experience out there among three people. They know a far lot more about how to run a foundry than I do.
Q. How do you serve as a role model for your culture?
It’s setting the example by being here early in the mornings most of the time, being the first car in the parking lot; many times, being one of the last cars out of the parking lot. Showing up on Saturdays if it’s nothing more than to bring in doughnuts.
They may not understand what I do up here; they may not understand what all my capacities are and my responsibilities. It’s being part of the company and showing up and suiting up and not being afraid to get my hands dirty if necessary.
If somebody needs to move boxes and they are there by themselves, then I’ll go out and help them move a box. I can’t just sit back and say, ‘I’ll go find somebody to help you.’ That doesn’t work. That doesn’t prove anything to him. That does not show that individual that I’m on the same team.
HOW TO REACH: TWR Lighting Inc., (713) 973-6905 or www.twrlighting.com
If you plan to stay married, you know that saying ‘I love you’ once does not mean you never have to say it again. The same goes for the business world and the need to constantly reiterate your company’s vision and values to your employees, says Birgit D. Kamps, founder and CEO of HireSynergy.
“It’s a constant conversation,” Kamps says. “Whenever there is a problem or conflict or any decision that needs to be made, I always say, ‘How does that relate to our values?’”
This sharp focus on communication helped the 40-employee company stay intact during its turbulent early years, which included a period of severe hardship followed by rapid growth, during which revenue grew to $10.6 million in 2006, up from $1.4 million in 2003.
Smart Business spoke with Kamps about the importance of staying tuned in to your internal customers also known as your employees.
Q. What is the key to really listening to your employees?
Someone who is a really a good listener is not making a commentary in their head and strategizing what to say next or pretending to listen when they are really not.
There is a particular sentence I use: ‘Be in their world, not in your world.’ Even though you may have known that person for 10 years and you think you have them pegged, unless you’re that person, you’ll never know where they are coming from 100 percent of the time.
They’ve had different experiences. Even a month ago, they may have had something happen personally that shifted their view on life. It is truly listening as if you have never spoken with that person before and you’ve never known that person before.
Q. How do you track your company’s success in sticking to its core values?
We meet with our team-mates every six months to see how they are doing and performing according to what they thought and what their career plans are.
We’ll also say, ‘Which value do you think the company has upheld the best this year, and which value do you think the company has been worst at?’ We’ll ask what we can do to improve that.
When you are growing really fast, you tend to focus on, ‘Let’s make sure the customer is happy.’ In the meantime, your internal customer, your team, is dying. You haven’t figured out yet how many more do you need to hire or put processes in place to adjust to the fast growth.
How do you expect the customer to get taken care of or expect people to go above and beyond if they are not happy internally?
Don’t wait until you are growing to address quality of life for your internal people. Take care of your internal customer, and your external customer will naturally get taken care of.
Q. How do you ensure new employees will fit with your vision and values?
Know how to sell your company and sell your story. Pick the top two or three reasons why someone should want to come to work for you instead of your competitor. Instead of saying they should be lucky to work for us, we actually positioned ourselves and said, ‘Hey, this is who we are and this is what we can offer.’
At first, we hadn’t defined our culture and our values. We had no process. We assumed everybody was interested in growing and getting better. Then we realized, ‘Oh, no, not everybody is interested in that.’
Once we had documented and expressed our values, then it became much easier to know what questions to ask and how to interview people.
Q. How can the CEO keep things on track?
I had the illusion before that I had to be present in the office, working hard and showing my values for them to do their job. Then I had some health concerns that I had to take care of and I realized, ‘No, that’s not really what it was.’
What was valuable to the team about me is that they knew they could count on me to uphold our values and be a standard for it. Whether you’re in the office 10 hours or two hours, the key is that they know you are committed to the company’s vision and values. The worst thing you could do is to work 15 hours and say, ‘I value integrity,’ and five minutes later, do something that is completely out of integrity and not let anybody tell you you’re out of integrity.
It’s really creating a culture where you, as the CEO, are someone who is safe to speak to when the team notices you are off on an area. They did that with me. I was withholding communication because I was dealing with so much personal stuff.
I was not upholding our values. I was definitely not being open. Practice what you preach in terms of value and vision, not necessarily what you do with your time and how you produce.
HOW TO REACH: HireSynergy, (713) 222-7667 or www.hiresynergy.com
Mary Spangler says leading an administrative team is like coaching a basketball team. An athletic team must include many different types of players because if it had only one type, it wouldn’t win or reach its goals. Spangler says it’s the same in business; you need different types of people with different strengths and weaknesses to be successful, and you need to help them understand their contribution to the team by playing to their strengths and learning how to improve on their weaknesses. As chancellor of Houston Community College an education system composed of six colleges throughout Houston with a fiscal 2007 budget of $225 million Spangler has encouraged her 5,391 employees to shine.
Smart Business spoke with Spangler about how to be a cheerleader and coach for your team to help it keep reaching goals.
Develop and encourage teamwork. Work with employees to say, ‘I don’t have all the answers. We’ve got a problem here, we all recognize it as a problem, but I’m not going to tell you what to do. We need to figure this out together; how are we going about doing that?’
Don’t talk about members of the team to other members. When you start talking about one person, then that person says, ‘OK, when I’m not here, is she talking about me?’ Be consistent, fair and open.
In a big organization, it’s hard if you’re deep in it to feel like you are making any kind of difference. Develop a vision and identify key goals. Hold in your head specific things, five or six things that you need to accomplish in order to achieve the goal.
If everybody can grab on to a piece of that, you can move something so that people feel that there’s energy and direction. Focus them on things you have done, not on the things you haven’t. Look at what’s good that is happening.
Communicate often and in different forms. You can’t say anything too many times. People don’t hear it the same way, and once isn’t enough. Use as many modes as you can to communicate that message; keep it focused and ask for feedback. Ask people, ‘Do you understand? Have I made it clear that this is what we’re trying to do? Do you understand what we need to do about it?’
I like to set up forums where I can sit around the table with a dozen people or go into a roomful of people where I can stand and have them ask me questions. They ask you, ‘Why did you do such and such, and are we going to have to do this and that?’ Answering their questions clearly, directly and with confidence communicates to them, ‘OK, this person sort of does understand, has thought about it, maybe does-n’t have all the answers but is enough connected that he or she can come into this environment without feeling nervous or defensive.’
Make good judgments. Watch people make bad judgments. I learned as I was moving up, I watched the person who I reported to and asked myself, ‘Did they handle that well? How would I have handled that? Did they say the right things?’ Look at what happened and ask, ‘Would there have been a better way to handle that?’
The more decisions you make, the better you get at it. When you make a decision, the reason it probably works is that you’ve made a commitment to it. Make a decision based on the consistent principles of fairness, equity and compassion, not making up the rules as you go along but having some guiding principles, applying them and making that decision work is how you learn judgment. It’s a skill to learn through practice.
Keep your promises. It’s critical when developing trust to not tell people more than you can do. Don’t promise what you can’t deliver. Maybe 90 percent of the time you can deliver it, but they’ll only remember the 10 percent that you promised and didn’t deliver. If you can’t promise, then you say, ‘I can’t make a commitment on this. However, I will review it; I will consider it,’ or, ‘I hear what you’re saying; I understand your concerns.’
Model behavior. Don’t expect people to do something that you wouldn’t do yourself. If you want them to be good team members or deliver on their outcomes, you need to demonstrate that yourself.
You can’t expect from them what you don’t do. Those are ways you develop trust, and then they get to know you as a real person and not as a name on their check. It comes from meeting with them in their environment, greeting them and showing them, ‘Hey, I’m a real person.’
Reward those who reach goals. Give feedback. You say, ‘You’re doing a good job, keep it up, don’t give up.’ You have to be a cheerleader and a coach on the sidelines. In a lot of ways, I can’t play the game, but I’ve got to watch all the moving parts and try to maximize that effort.
Not everybody expects an award or a pat on the back, but when there is especially good work done, and it comes to your attention, it should be reinforced. Focus on the positive, and when people feel good, they’re more willing to work hard.
HOW TO REACH: Houston Community College, (713) 718-2000 or www.hccs.edu
George F. Black has seen a lot and learned a lot in his 11 years as president and CEO at RSA Corp. But when it comes to determining the cultural fit of an executive-level job candidate at the 100-employee company, Black often turns to his wife, Sherry, for advice.
“She has incredible intuition,” Black says. “She knows my company quite well. At times, she says, ‘I still don’t understand what you really do, but I know what kind of people are good for you.’”
While skills are valuable, Black says it’s just as important that a new employee fit in with the other employees and buy in to the company’s vision and values.
By making cultural management a part of his job description, Black has led the IT, strategy and staffing services provider from $6.4 million in revenue in 2003 to $14.5 million in 2006.
Smart Business spoke with Black about how to make your employees feel valued by letting them write on the walls.
Q. How do you get off to a good start with a job interview?
A resume should only answer one question, and that question should be, ‘Do I want to know more?’ The mistake that many of us make is to look at a resume and decide that isn’t the person and not do a thorough job of figuring out who this person is.
Never make a prospective candidate wait. If you can’t and it’s just unavoidable, make sure someone meets the candidate and helps them through the wait time.
Secondly, I always ask the candidate to share with me their most memorable success and their most memorable mistake. A lot of insight can come from those two. Probably as important as anything else is to ask open-ended questions or questions that cannot be answered by yes or no.
Try to relax the person who is interviewing through some open-ended banter at the very beginning. I never interview across my desk. My interviews are always either around a conference table or in a couch and chair setting.
Q. What tools do you use to determine cultural fit?
Get the individual into a social setting. Everybody is on their best behavior through the interview.
If you can get them to relax a little bit, that’s when some of the true story comes through. It doesn’t always work; it’s not 100 percent foolproof. But if you can get that opportunity, at times, you can see if the real person comes through.
Q. How can you ensure a smooth start for a new employee?
One of the industry trainers and gurus I respect is a man by the name of Jack Daly. One of the things he talks about is how crazy we are because we celebrate when an employee resigns. We have a going-away party.
But we don’t do anything like that when a person starts. It’s important to welcome a person on board so the first couple of days are memorable to them in a positive manner.
When someone starts a new job, there is a lot of trepidation. There is a lot of worry as to how I’m going to fit in.
When we have a new employee start, particularly an executive, we have a two-week indoctrination or orientation plan that includes every important touch point within the organization.
We meet in the reception area for a little continental breakfast and introduce the new employee to everybody. We say, ‘We’re glad you’re here.’ You can go as far as having balloons on the back of their chair so when they walk into their office, they have colorful balloons saying, ‘Welcome.’
It really gets them started on the right foot. There is no lack of understanding for what to do the first two weeks. I think that’s a real important step to getting a person launched correctly.
Q. How do you maintain a healthy company culture?
It’s part of our culture to regularly recognize and celebrate. It’s well-known that after a certain level, salary falls way down on the list of motivators for employees. Right up at the top is recognition and the ability to feel like one is making a difference.
You can see the chests swell with pride when they are recognized.
One way for everybody to participate is the use of bulletin boards and write-on walls. There are pictures and success stories and the opportunity for people just walking down the hall, if they have a creative thought on something that is going on in a project, they just write on it.
It has all of the various projects that are going on and the initiatives that are in progress, and people can just come along and write on it. Just say, ‘What about this? Have you thought about this?’ It’s a way for everybody to participate. <<
HOW TO REACH: RSA Corp., (281) 488-7961 or www.rsacorp.com
With recent activity in the private equity arena, business owners have been placing considerable emphasis on structuring their companies to maximize the price of an ultimate sale. However, smart business owners should begin to position themselves before reaching the top of their game so as to structure their companies for sale from an estate-planning perspective. Tax law developments in recent years, including capital gains and dividend rate reductions, make it imperative for business owners to examine current estate planning so as to minimize the tax cost of transferring the business and maximize its value to the retiring owner or the next generation.
Smart Business asked John Brentin, a partner at Porter & Hedges LLP, how business owners can leverage their wealth, retain their monetary gains and prepare their companies for sale.
Why should business owners be concerned early on with transition planning?
It is inevitable that for every business owner, at some point a transition will occur by sale, incapacity or death. If there is no heir-apparent, it is then necessary to put in place a mechanism to allow the most appropriate person to carry forward the vision of the founder. Likewise, if there is no one of the next generation capable or with a desire to carry forward the business, a lack of early planning can lead to significant tax liability should a transition be forced upon business owners. In those unfortunate circumstances where there is a death of the owner, without advanced planning, the business can be adversely affected, both operationally and from a cash flow perspective.
How can business owners minimize estate and gift taxes?
The current reality is that there is no repeal of the death tax forthcoming. At rates approaching 50 percent and a current exemption of only $2 million, planning is critical. Since the estate and gift tax is applied to the value of assets being transferred, successful planning seeks ways to transfer wealth while minimizing the valuation of retained assets that will be included in the estate. For those business owners who desire to minimize estate taxes there are several available options. Currently, the annual gift tax exclusion amount is $12,000. This means that a husband and wife can now give $24,000 to as many individuals they care to benefit every year. If they transfer interests in the family business, they can leverage the gift using a qualified appraisal of the interest that is appropriately discounted for lack of control and marketability. Another option is to transfer those interests into a trust established for family members to keep the business within the family for succeeding generations. If large transfers are desired, using a grantor trust may allow them to sell up to their entire business interest in exchange for a promissory note without paying any income tax on the sale.
Why are control, timing and form of business so important to transfer planning?
Control of a business has a great deal to do with the concept of valuation. Further, since our entire transfer tax system is based on value, timing also plays an integral role. Finally, not all forms of doing business are created equal. Today’s business owner has a wide array of choices, and some structures are better suited than others to facilitate a transition of ownership.
From a timing perspective, the ideal times to begin a transfer of ownership process are at the initial start-up or during an economic downturn. The value of the company is lower, which is a benefit for valuation purposes in tax planning. Based on the options available to minimize estate taxes during such a period, an owner has the ability to retain control while putting in place a mechanism to facilitate the transfer of the value to the next generation.
Finally, formulating a succession plan often reveals that the original structure of the business entity may no longer be appropriate. Recent amendments to Texas statutes and changes in federal tax law make it easy to convert from one form of business to another. A successful plan will always assess and isolate risks and potential liabilities. If a particular facet of the business operation produces a greater risk, it may be appropriate to form an additional entity to conduct that part of the business operation.
How flexible should you be with your transition plan?
It is wise to plan for all contingencies and allow for flexibility in your transition plan, knowing that every circumstance planned for will not actually happen. Building in flexibility allows those left in charge to react to unforeseen conditions. A transfer plan that reacts to the ebb and flow of the business world can help alleviate the worries and assure the continued success of the enterprise.
JOHN BRENTIN, a partner at Porter & Hedges LLP, is in charge of the firm’s wealth preservation practice. Reach him at (713) 226-6663 or firstname.lastname@example.org.